The portents weren't good when Prime Minister Tony Blair opened Cumberland Infirmary in Carlisle last June.

What should have been a triumph for the Government - a shiny new 'Third Way' hospital built for the public using private money - turned into farce when protesting foxhunters drowned out the self-congratulatory opening speeches.

Maybe it was indeed a sign because, since Blair's ill-fated visit, things have gone terribly wrong at Cumberland, the country's first hospital financed by the controversial private finance initiative:

 Two ceilings have col lapsed because of cheap plastic joints in piping and other plumbing faults - one joint narrowly missed patients in the maternity unit.  The sewerage system could not cope with the number of users and filth flooded an operating theatre.  Clerical and laundry staff cannot work in their offices because they are too small.  Expensive bespoke trolleys had to be commissioned because those supplied don't fit the spaces between beds.  The transparent roof means that on sunny days the temperature inside Cumberland Infirmary reaches over 33C - the hospital has no air conditioning.  Two windows have blown out of their frames, one showering a consultant and a nurse with glass.

These 'mistakes' are bad enough, but what is worse is that in August, when hospitals are usually quiet, there are now 'bed jams' at the 444-bed Cumberland, which is currently at full capacity.

'God only knows what will happen in the winter,' a Unison spokesman said. 'It's appalling and the whole PFI project, not just Carlisle, seems to be flying in the face of Blair's National Plan for the NHS to get more beds into the system.'

A spokesman for the infirmary confirmed each of the problems: 'We acknowledge there have been teething problems but we don't feel they're related to PFI.'

The summer bed jam is blamed by the Carlisle Trust on 'an unusual number of emergency admissions, which is blurring the line between summer and winter'.

Amec, the main construction company on the project, whose shares have leapt 40 per cent in six weeks thanks to increased public spending earmarked in last month's Comprehensive Spending Review, would not comment on specifics, other than to say: 'We are extremely proud of our work in Carlisle and any problems are part of teething difficulties associated with major projects.'

But those in Carlisle disagree. They say what is wrong with Cumberland is symptomatic of a deeper malaise. The first PFI hospital represents all that critics hate about this funding model. They say PFI is a totally unsatisfactory solution that will divert money from health provision into the hands of accountants, lawyers, surveyors and construction companies.

The most fundamental criticism is that the NHS is paying over the odds for new hospitals. Under the PFI model, a private-sector consortium owns a building and leases it back to a health trust. Most lease contracts, including Cumberland, have rents linked to the retail price index and last 30 years or longer.

Cumberland will pay £11 million in rent this year to the PFI consortium. Inflation currently stands at 2.2 per cent. That means next year Cumberland will fork out an extra £242,000 in rent.

While inflation is now under control, no one knows how the economy will pan out in five years, let alone 30 years.

'We could be paying well over £500m for a hospital which only cost £67m,' said one Cumberland insider.

Small wonder an Institute of Directors survey last June found that 70 per cent of those involved in PFI believe it provides an investment opportunity with a reasonable return and without unmanageable risk.

With the pressure to create a decent return for the private sector, all costs are squeezed. Smaller hospitals cost less to build and the British Medical Association estimates that 5,000 beds will be lost to the system once the 38 PFI hospitals, costing more than £3.6 billion, are built.

Reducing the number of beds is not necessarily a bad thing. But, as in the case of Cumberland, a reduction in beds could prove fatal come winter.

Health Minister Alan Milburn was so concerned about PFI bed cuts that he ordered the £900m University College Hospital PFI scheme, again led by Amec, to increase bed provision. Observers say this will push costs to well over £1bn.

Architects, meanwhile, are often frozen out of the PFI design process and cheap materials are used in many schemes.

'The main difficulty for the architect is that we are kept away from hospital workers. Our client is the consortium. This doesn't serve the best interest of design and that's why mistakes happen,' said one architect who has worked on many hospital PFI projects.

Advocates of PFI say that following Treasury guidelines on PFI last March, the NHS is no longer forced to accept the lowest tender for a scheme and that 'best value' are now the watchwords. This will see the quality of future hospitals improve.

That may be, but in Dudley, West Midlands, ancillary workers have more pressing concerns. They are poised to strike because new workers in the PFI hospital will not be guaranteed NHS pensions.

In Worcestershire, there are fears that David Lock, the Kidderminster Labour MP, could lose his seat to an independent opposed to plans to merge the local hospital with one in Worcester, leading to a 28 per cent reduction in acute beds.

But the PFI hospital bandwagon rolls on. Since May 1997, the Government has given the go-ahead for 38 - half are under way.

Within months, NHS Estates, which is responsible for the Health Service's property portfolio worth £23bn, will sell a £900m chunk of its real estate. Once sold, the money will be used to part-fund more PFI schemes because the Treasury and the Department of Health are adamant that there is no alternative to PFI.

The days of public infrastructure projects paid and owned by the state are clearly over. But the legacy of hospital PFI schemes in years to come may make last winter's NHS crisis, when a flu epidemic nearly brought the system to a standstill, seem like a fuss about nothing.

What is the Private Finance Initiative (PFI)? The Private Finance Initiative (PFI) is a method used in public sector projects such as the building and operation of trunk roads, rail and underground train networks, government computer systems and the construction of NHS hospitals. It was launched by the Conservative government in 1992 and has been enthusiastically continued by Labour.

PFI's aim, said the Treasury in 1997, is to transform 'public sector organisations from being owners of assets and direct providers of services into purchasers of services from the private sector'.

Once a consortium wins the right to build, for example, a new hospital, after costly tendering processes, it will lease the buildings back to the NHS at market rates for between 20 and 60 years.In the long run this is demonstrably more expensive than if the NHS was to build its own hospitals, not least because the private sector cannot borrow money as cheaply as government.

Also, professional fees for lawyers, accountants and surveyors can lead to hefty additional costs.

So why do it? By giving the private sector responsibility for providing services and buildings for the public sector, the Treasury can keep these projects off balance sheet which means public borrowing is lower.